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Thursday, October 28, 2021

Morrisons: US firm wins auction to take over supermarket chain


A US private equity group is poised to take control of the UK’s fourth-largest supermarket group.

Clayton, Dubilier & Rice (CD&R) won the auction for the British supermarket Morrisons with a bid of £7 billion ($9.5 billion).

Terry Leahy, the former CEO of Tesco and a senior adviser to CD&R, is making a return to the UK grocery sector.

The takeover saga has dragged on since June, with two US-based investment groups vying for control.

On Saturday, the stock market’s Takeover Panel announced CD&R’s victory. The private equity firm offered 287p per Morrisons ordinary share, compared to Fortress’ offer of 286p per share.

The auction offer from CD&R is slightly higher than the 285p-a-share offer recommended by Morrisons’ board in August. Morrisons turned down a £5.5 billion offer from CD&R in July, claiming it significantly undervalued the company.

The board of directors, which will meet on Saturday, is now expected to recommend that shareholders accept the new offer at a meeting on October 19th.

If shareholders approve the bid, CD&R will take over Morrisons by November.

Morrisons was founded in 1899 in Bradford, where it still has its headquarters. The company operates nearly 500 stores and employs over 110,000 people.

The late Sir Ken Morrison, the late founder’s son, ran the business for 50 years.

CD&R previously stated that it recognises Morrisons’ “history and culture, and believes that this strong heritage is core to Morrisons and its approach to grocery retailing.”

The private equity firm stated that it would assist Morrisons in capitalising on its strengths, such as its close relationships with suppliers and property portfolio.

Sir Terry previously worked with Morrisons chairman Andrew Higginson and chief operating officer Trevor Strain at Tesco.

Mr Higginson described the offer as “excellent value for shareholders while preserving Morrisons’ fundamental character.”

He stated that the private equity firm “has a strong track record of developing and growing the businesses in which they invest, and they share our vision and ambition for Morrisons.”

Sir Terry thanked the board for its recommendation and stated that CD&R was looking forward to shareholder approval of the transaction, adding, “We continue to believe that Morrisons is an excellent business, with a strong management team, a clear strategy, and good prospects.”

Morrisons is one of a slew of UK companies being pursued by foreign investors, and it looks set to become the second UK supermarket chain to be acquired by private equity in a year, following Asda’s acquisition in February.

With the UK hard hit by the pandemic and the pound still trading below its pre-Brexit level, UK businesses may appear cheap to non-UK investors, according to the BBC’s business editor Simon Jack.

While some argue that these bids demonstrate the value of – and confidence in – UK plc, others are concerned that private buyouts increase debt levels, reduce transparency, and mean that key decisions about the future of UK companies such as Morrisons may be made in New York rather than Bradford.

Sir Terry also advised CD&R on its acquisition of discount retailer B&M, which resulted in a £1 billion profit for the private equity firm when it was sold.

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